There are basically two forms of payment within VoIP wholesale: Post pay and prepay. There are many shades of grey in between, such as prepay with credit, transit credit and so on, but the two opposite ends of the spectrum are prepay and post pay.
To ask the customer to pay first, and therefore to trust us, or to trust the customer and let him pay after usage, that is the VoIP sales question.
Customer obviously prefer post pay, we obviously prefer our customer to prepay us. Talking to team members that have newly received post pay customers, I discussed prepay and post pay customers.
Trust:
According to one account manager, it is not about traffic volumes, it is about trusting customers enough to extend credit. It is not about individuals, it is about organizations in the sense that an organization is not likely to get up and leave with a debt of thousands of dollars. However, exceptions are made for customers who are personally known to the top hierarchy of our management.
Talking to the post pay team, there were dissenting opinions against one-shows. It was felt that even if the customer was well known and had been working with us for some time, it increased risk levels to unacceptable. As my ex-boss said “I wouldn’t even trust my uncle in VoIP!”. Others however felt that many VoIP businessmen had been in the field a long time, with high traffic volumes, but without proper set ups. Personally known to Breezecom, these VoIPers deserved the trust of credit.
Keeping that in mind, the stringent standards set by Breezecom do contravene the risk factor of extending credit to one man shows. Audited financials given the company a good idea of whether the customer is capable of paying back what he owes.
But in the end, ability to pay does not guarantee that he will actually pay, and post pay comes down to trust.
The credit game – volumes vs. risk:
To build volumes, extending credit is a must. Since that increases risk of default, the balance of scales is between building volumes but at a risk of losing out on the payment.
According to one account manager “it’s a credit world. You have to lose some to win some”.
From personal experience I know that it is difficult, if not nearly impossible, to build traffic without extending some amount of credit. Hence the higher the risk, higher the pay out.
Initial Investment:
The initial challenge lies in bringing a post pay customer on board. Where a prepay customer can come on board in a matter of days with a little encouragement from the account manager, post pay requires weeks of follow ups, emails, background checks, and meetings with finance, strategy and the top hierarchy. A pre-contractual prepay customer comes on board with almost no paperwork whereas a post pay customer requires enough to paperwork to fill a binder!
Thus the initial investment of time in a post pay customer is much higher than a prepay customer. Where an account manager brings 3 to 4 prepay customers on board in a month on average, a post pay customer is brought on board on the average of one every two months.
Paradox of Ponderous Post pay:
Though post pay customers are ponderous to bring on board, in the longer term they require less maintenance.
There is no need of constant harassment to cough up a payment. Their traffic is less sticky and less inclined to move at the slightest inclination of lower rates elsewhere. Also, all post pay customers are old hands at the VoIP game. They are professionals, usually with experienced NOC teams and hence do not send abusive emails to NOC if a single call goes awry. Regarding rates, routes and following the set SOP, they are more cooperative.
The paradox lies in the difficulty of assessing a customer worthy for post pay and the risk undertaken, compared to the ease of maintenance.
In the opinion of the account managers currently handling prepay and post pay customers both, post pay customers are more lucrative in the long run and hence should be encouraged. To counteract the risk, the initial analysis should be strong enough to tip the balance of scales in favour of trust rather than higher default risk.